bbgold,
I understand your optimism but I don't share it.
The way I see it, they could lose 2 ways.
They can either use financing but at these prices
the dilution would be enormous.
OR they could layoff some people and lose top talent.
Right now public opinion doesn't help at all - see article.
Maybe they could get out of it if Alcatel plays a role.
Could they get a loan from ALA or get bought out ?
Just my 2 cents,
Francois
CrossKeys on the edge
Without cash infusion, end could come by
Dec. 20
Jeff Pappone
The Ottawa Citizen
Without drastic measures to cut costs and restructure the
business, CrossKeys Systems Corp. might have less than a
month before it runs out of cash, analysts say.
The company ravaged its $18-million reserve during the past
quarter, leaving only $4 million in the bank and little time to
play with, analyst Brandon Osten of Sprott Securities Ltd. said
yesterday. "You have a situation where they had $14 million
in operating losses in the quarter and now they have $4
million in cash. So, do the math. There's going to have to be
some degree of financing."
After an earnings warning on Monday for its second quarter,
analysts scrambled to reassess the future of the chronic
underachiever. CrossKeys revealed it might lose as much as
$20.5 million, or $1.07 a share, on revenues of between $4.2
million and $4.7 million. All five firms covering the company
have since downgraded the stock.
After drawing about $4.7 million a month from reserves in
the past quarter, its cash on hand might not last beyond the
Dec. 20 date CrossKeys has set to announce its plans.
Yesterday, CrossKeys spokes-man John Blackmore would say
only that the company was weighing its options.
"We have no news to convey to anyone at this time," Mr.
Blackmore said. "We have committed to getting back to our
shareholders by Dec. 20, and we're working through our
options currently."
With CrossKeys spending an inordinate amount on sales and
marketing, analyst Michel DeLavergne of GroomeCapital
believes cuts will start there.
"Certainly it's far worse than I think anybody could have
expected," he said. "Clearly, CrossKeys' cost structure simply
doesn't make sense with the revenue levels the company has."
Mr. Osten agreed, saying he would not be surprised to see
layoffs among the company's 376 employees.
"They are going to have to find some way to cut costs," he said.
"Obviously they can't afford to burn this much cash on an
ongoing basis,."
The most likely solution to the company's cash crunch is a line
of credit or short-term financing, combined with
restructuring, Mr. Osten said.
While companies often issue shares as a way to raise capital,
CrossKeys' low stock price makes that unlikely.
"If it comes to a question of survival, they could dilute
themselves and issue a lot of shares," Mr. Osten said. "It's not
the preferred way to go if they think they can rebound the
business."
The stock hit an all-time low of $1.40 yesterday before
coming back to close at $1.47, down eight cents on the day on
the Toronto Stock Exchange. The shares have shed about 84
per cent in value since the warning.
Its depressed share price also means CrossKeys could be a
takeover target. Yesterday, a 51- per-cent controlling share
would have cost $15.83 million.
"Some of their product portfolio is attractive," Mr. Osten said.
"The Dyband is a pretty unique application that applies to a
young but growing market. |
